FedEx Corporation’s (FDX) first quarter results came at 58 cents per share, in-line with the Zacks Consensus Estimate. This was, however, down from $1.23 per diluted share reported in the year-ago quarter. Earnings overall were negatively affected by the global recession.

Revenue slumped 20% to $8.01 billion, and operating margin fell to 3.9% from 6.3%. Revenue at the company’s overnight-air business fell 23%, with earnings down 70%. The company’s earnings remain plagued by the global recession. Though management forecasted a gradual turnaround in global economy, for the fiscal year it expects earnings to remain subdued, compared to the previous-year level.

For the second quarter, management expects earnings in the range of 65-95 cents per share.

As a cost containment measure, the company retrenched a significant number of workers last year and also slashed wages for many of its employees. FedEx expects to save about $3 billion by the end of fiscal 2010 in May from its cost-cutting initiatives since Jun 2008.

Segment Results

In its Express segment, U.S. package revenue fell 22% on lighter and less expensive packages and lower fuel fees. But the number of packages FedEx shipped domestically grew slightly. Management announced that it will increase rates by an average of 5.9% for U.S. domestic and U.S. export services early next year.

FedEx witnessed a 2% fall in revenue in its Ground segment with average daily volume off 1%.

FedEx Freight segment reported a 27% year-over-year decline in revenues, with operating income falling as much as 98% on an annual basis. Operating income decreased in the quarter due to the lower average daily LTL shipments and the competitive pricing environment, partially offset by cost-reduction actions.

FedEx Services segment revenue for the quarter, which included the operations of FedEx Office and FedEx Global Supply Chain Services, was down 12% year over year, primarily due to declines in copy product revenues.

With a gradual upturn in the retail, automotive and housing sectors, we expect the coming quarter will be better than the previous term with more packages being shipped, but will continue to lag behind prior years’ gains.
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